Cairn fights fears of India float flop

Cairn Energy's marketing of the flotation of its Indian unit finishes today amid fears the listing may make a disappointing debut.

Sentiment has been shaken by a weak Indian share market, potential delays in production and the reemergence of a dispute with India's state-owned Oil & Natural Gas Corp (ONGC) over tax payments.

However, the float was 1.3 times subscribed on the first day as Cairn India seeks to raise $2.2bn (£bn).

Cairn has been busy allaying fears it raised itself in the offer documents that production from its biggest field, in Rajasthan, may be delayed.

It said it may help fund an oil pipeline to avoid delaying the project.

The company said it was in talks with ONGC to ensure the link is built by the time production starts in 2009.

The 310-mile pipeline will link the Rajasthan field to a port and cost 20bn rupees (£22.7m).

Meanwhile, the Indian press has resurrected the dispute between Cairn and ONGC over tax payments on the crude that will be produced from a key block. Some reports put the total bill at $940m.

But a Cairn director told industry magazine Upstream: 'This is old news and something we have until 2009 to determine. Rajasthan is expected to deliver gross revenues of between $50bn and $60bn, so the field development's economics would not be unduly compromised.'

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On the plus side, Cairn has been buoyed by reports that oil and gas multinational Petronas is likely to expand its partnership and could eventually-play a role in the Rajasthan operations. Petronas bought 10% of Cairn India for $692m but has said it would not be making further investments in the company.

Cairn chief executive Sir Bill Gammell has expressed his happiness over Petronas's decision to buy a stake in Cairn India.